Dow Tumbles 130 Points in Afternoon Trade

[SLCPUNK]

By CHRISTOPHER WANG, AP Business Writer 14 minutes ago

NEW YORK - Stocks plunged Thursday as surging oil and commodities prices fueled investors' uncertainty about inflation and higher interest rates, sending the Dow Jones industrial average falling 130 points.

Declining profit at Dow Jones industrial AIG and at media conglomerate Viacom Inc. also stunned a market that has enjoyed yet another quarter of outstanding corporate earnings. But a slight drop in unemployment claims bolstered confidence that the job market remains sturdy.

The day's blend of data further baffled investors looking for clarity about an economy teetering between growth and inflation. The sharp decline reflected Wall Street's deep disappointment with the
Federal Reserve's statement on Wednesday that more rate tightening could be needed to counter inflationary pressures.

"The market had priced in a very optimistic Fed outlook, and of course we didn't get it," said Ed Peters, chief investment officer at PanAgora Asset Management. "Secondly, we do have this problem with commodities, and it continues to build."

A lower-than-expected rise in April retail sales lent some support to views that high energy costs will hinder consumer spending and prevent the economy from overheating. However, oil and gold prices continued steaming forward, which fanned worries that rising prices could bring more interest rate hikes.

In midafternoon trading, the Dow plunged 130.23, or 1.12 percent, to 11,512.42. The Dow on Wednesday came within 75 points of its best-ever close of 11,722.98, reached on Jan. 14, 2000.

Broader stock indicators were lower. The Standard & Poor's 500 index was down 15.11, or 1.14 percent, at 1,307.74, and the Nasdaq composite index lost 40.65, or 1.75 percent, to 2,280.09.

Interest rate concerns weighed on the dollar and bonds, with the yield on the 10-year Treasury note climbing to 5.16 percent from 5.13 percent late Wednesday. The U.S. dollar continued sliding against the Japanese yen and was flat versus European currencies

Hefty gains among commodities made investors anxious that inflation could begin affecting core prices, which exclude volatile costs like food and energy. Gold prices soared to a fresh 25-year high of $725 an ounce, and helped carry copper and silver prices higher.

Crude futures leaped as traders cast aside reports of increased U.S. reserves and worried about a Texas refinery snag and political unrest in Nigeria. A barrel of light crude jumped $1.12 to $73.25 on the New York Mercantile Exchange.

http://news.yahoo.com/s/ap/20060511/ap_on_bi_st_ma_re/wall_street

[ECH1969]

1. The Fed is going to raise interest rates again and again and again

[OrangeCountyDemocrat]

3. Pause?

Do you think they'll take a month off, just to make it look like they're doing something for the corporate stock market?

[Eurobabe]

6. that ought'a permanently fuck the housing market

I'm outta here in the nick of time!

[OrangeCountyDemocrat]

2. Got Gold?

At least they give Gold a token paragraph.

I hope they continue to ignore it completely. It doesn't need their help getting to $1,000.

[Eurobabe]

7. sure wish I had bought some when a friend's

dad offered it at $486 last fall. :sad:

[Kelvin Mace]

9. Gold?

http://www.thoughtcrimes.org/s9/index.php?/archives/767-Could-someone-give-the-media-an-Econ-101-lesson.html

[rodeodance]

4. they sure spook easilty

[Yavin4]

5. Interest Rates Are Still Too Low

Interest rates are out of balance with the amount of debt that's out there. The Fed has been setting rates in accordanc with a political agenda instead of maintaining a balance.

[Kolesar]

8. And there is an unknown "M3" money supply now

They quit reporting how much money is in circulation a few months ago.

"They"